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HQ 555174

April 25, 1989

CLA-2 CO:R:C:V 555174 GRV


TARIFF NO.: 9801.00.10, HTSUS (formerly 800.00, TSUS); 9802.00.50, HTSUS (formerly 806.20, TSUS)

Mr. Richard G. Seley
Rudolph Miles & Sons, Inc.
Customhouse Brokers
4950 Gateway East
P.O. Box 144
El Paso, Texas 79942

RE: Applicability of HTSUS subheading 9801.00.10 or HTSUS sub- heading 9802.00.50 to plastic banner products to be imported from Mexico

Dear Mr. Seley:

This is in response to your letters of November 4, 1988, and March 15, 1989, on behalf of Hallmark Marketing Corporation, requesting a ruling on the applicability of either subheading 9801.00.10 or 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to plastic decorative banners to be cut to shorter lengths and packaged in Mexico. You also inquire as to the proper tariff classification and country of origin marking requirements for this merchandise. A sample banner was submit- ted for examination.


You state that decorative banners, bearing repetitive holi- day greetings, are finished products of U.S. origin. A single banner greeting measures approximately 32 inches in length and is repetitively printed approximately 52 times on continuous sheets of plastic, each measuring 140 feet in length, which are exported in rolls. The banner rolls and U.S. packaging materials, con- sisting of plastic baggies and cardboard boxes, will then be sent to Mexico for packaging. The operations to be performed in Mexico consist of rolling off as many repetitions of the holiday greeting as are required (usually 5 to 7), cutting the banner to length at a right angle, conformity folding the banner to fit into the 2 inch wide by 4 inch in length baggie, and inserting the banner into the plastic package for retail sale. These indi- vidual baggies are then packaged into larger, nonreusable card- board packing containers of a kind normally used for packaging such goods.


Whether the returned, packaged banners are entitled to the benefits of either HTSUS subheading 9801.00.10 or 9802.00.50.


Effective January 1, 1989, the HTSUS superseded and re- placed the TSUS. TSUS item 800.00 was carried over into the HTSUS without change as subheading 9801.00.10. This tariff provision provides for the duty-free entry of U.S. products that are exported and returned without having been advanced in value or improved in condition by any means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met.

TSUS item 806.20 was carried over into the HTSUS, in part, as subheading 9802.00.50. This tariff provision provides a partial duty exemption for articles returned to the U.S. after having been exported to be advanced in value or improved in condition by means of repairs or alterations (other than under warranty). Under this tariff provision, there is a duty only upon the value of the foreign repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are met.

Regarding the duty exemption under HTSUS subheading 9801.00.10, in Border Brokerage Company, Inc. v. United States, 65 Cust.Ct. 50, C.D. 4052, 314 F.Supp. 788, 792 (1970), appeal dismissed, 58 CCPA 165 (1970), the U.S. Customs Court stated that:

...the test to be applied in item 800.00 cases is whether the merchandise of American origin has itself (apart from its container) been the object of advancement in value or improvement in condition while abroad.

In the instant case, the exported banner rolls themselves will be subjected to an operation which results in the merchan- dise being advanced in value or improved in condition. The ban- ner product to be packaged abroad is cut to shorter lengths from a continuous roll of banner messages measuring approximately 140 feet in length. In regard to HTSUS subheading 9801.00.10, we have previously stated that cutting exported merchandise to length generally results in advancing it in value or improving it in condition. Headquarters Ruling Letters 554736 (February 16, 1988) and 554899 (March 4, 1988). In the instant case, decora- tive banners cut to shorter lengths for retail sale clearly are more marketable than rolls of banners in 140-foot lengths and this change in the banners' marketability constitutes an
improvement in the merchandise's condition. Thus, the returned banners will not be eligible for the duty exemption available under HTSUS subheading 9801.00.10.

Regarding the partial duty exemption under HTSUS subheading 9802.00.50, in Dolliff & Company, Inc., v. United States, 66 CCPA 77, C.A.D. 1225, 599 F. 2d 1015 (1979), the U.S. Court of Customs and Patent Appeals stated that:

...repairs and alterations are made to completed articles and do not include intermediate processing operations which are performed as a matter of course in the preparation or the manufacture of finished articles. (Court's emphasis).

Thus, the focus is upon whether the exported article is "incomplete" or "unsuitable for its intended use" prior to the foreign processing. Guardian Industries Corp. v. United States, 3 CIT 9 (1982).

In this case, the sample submitted evidences the fact that the exported banners are incomplete products since they are unsuitable for their intended use in the continuous lengths (140 feet) in which they are exported. We have previously held in a ruling dated September 20, 1983 (HQ 071475), concerning TSUS item 806.20 that:

...where rolls of material are exported and finished goods are returned merely by cutting to length, this cutting constitutes a finishing step in the manufacture of the goods, converting large rolls of raw material to finished, usable sheets. The conversion from material lengths to finished products exceeds the meaning of the term "alterations" under this tariff provision.

See, also, Headquarters Ruling 554736 dated February 16, 1988. Thus, it is our opinion that the cutting to length operation in the instant case constitutes a finishing step in the manufacture of the completed banners, thereby precluding application of HTSUS subheading 9802.00.50 to the returned merchandise.

Regarding country of origin marking requirements, section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), generally provides that all articles of foreign origin (or their containers) imported into the United States are required to be legibly, conspicuously, and permanently marked to indicate the country of origin to an ultimate purchaser in the United States. For purposes of this statute, "country of origin" means the country of manufacture, product or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a
substantial transformation in order to render such other country the "country of origin" (19 CFR 134.1). In Upjohn Co. v. United States, 623 F.Supp. 1281 (CIT 1985), the U.S. Court of International Trade stated that:

[e]xported American products retain their identity as American products, provided they are not transformed into new products while abroad.

In this case, we believe that for purposes of marking the imported product is a product of the United States. Although the exported continuous rolls of banner material are advanced in value, they are merely processed into finished articles by a cutting to length operation while abroad, which does not sub- stantially transform them into products of Mexico. Accordingly, the returned banners will remain products of the U.S. for country of origin marking purposes and are excepted from the marking requirements of 19 U.S.C. 1304.

Your question concerning the tariff classification of the plastic decorative banners will be addressed in a separate letter.


On the basis of the information and sample submitted, we conclude that the cutting to length operation advances in value and improves in condition the exported banners. This renders the returned banners ineligible for the duty exemption available under HTSUS subheading 9801.00.10. Further, the banners are incomplete articles as exported and the foreign cutting to length operation serves as a finishing process. This renders the returned banners ineligible for the partial duty exemption avail- able under HTSUS subheading 9802.00.50. Therefore, the returned banners will be dutiable on their full value. However, the cutting to length operation does not transform the exported banner products into new products while abroad. Thus, the returned banners remain products of the U.S. for country of origin marking purposes.


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